Redundancy & Restructuring

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If you need to make redundancies and wish to remain legally compliant with the redundancy process, or simply wish to know how much your employees are entitled to, Blacks Solicitors’ Employment Law team can help.

Businesses sometimes face the prospect of having to make employees redundant. This can be for a number of reasons, but the most common is that the business doesn’t have enough work to keep everyone in employment.

Redundancy is a potentially fair reason for dismissal. However if you need to make redundancies you must follow a fair procedure when selecting who to dismiss – or risk a claim of unfair dismissal in an Employment Tribunal.

The Employment Rights Act 1996 defines a redundancy as arising where:

  • The employer has ceased, or intends to cease, carrying on business for the purpose for which the employee was employed (cessation of business)
  • The employer has ceased or intends to cease to carry on that business in the place where the employee was so employed (changing place of work)
  • The employer’s requirement for employees to carry out work of a particular kind, or to do so in the place where the employee was so employed, has ceased or diminished or is expected to cease or diminish (surplus labour)

To render a redundancy dismissal fair, the employer must show that:

  • Redundancy was the true reason for the dismissal
  • The employer acted reasonably in dismissing the employee

If more than 20 employees are affected by the potential redundancy situation, more complex rules in respect of “collective consultation” are triggered and you should seek legal advice.

Redundancy Pay

If you are an employer who needs to make redundancies you need to know from the outset what your likely financial exposure will be when it comes to making Statutory Redundancy Payments.

If you fail to satisfy the requirements set out above you may face a claim for:

  • Breach of Contract
  • A Statutory Redundancy Payment
  • Compensation for unfair dismissal
  • A Basic Award (based on a week’s pay – capped at £508 from 6 April 2018 for each complete year of continuous service). This will be off-set against any Statutory Redundancy Payments already received

Currently, redundant employees are entitled to receive:

  • Half a week’s pay for each year of employment before their 21st birthday
  • A week’s pay for each year of employment after their 22nd birthday
  • A week and a half’s pay for each year of employment over the age of 41

For the purposes of calculating a redundancy entitlement, a week’s pay is capped at £508 (as at 6 April 2018). Employees can claim for a maximum of 20 years’ service.

Restructuring

Whilst many employers think that redundancies are required (or inevitable) to continue trading, more often than not the same result can be achieved by restructuring the organisation to meet the needs of the market place. Employers can often fail to recognise the benefits of arrangements such as part-time working, reduced hours, flexible working, or compressed hours, and instead opt to dismiss staff at the first sign of declining profits.

However, by taking expert advice at an early stage, you may be able to restructure your business without losing staff and ensure that you have a flexible organisation that is able to deal with future challenges.

 

If you aren’t sure whether you could restructure your business, if you would like to know how much redundancy pay your employees would be entitled to, or if you would like to find out more about how we can help ensure you remain legally compliant during a redundancy process, please email or call Blacks’ Employment Law team today on 0113 207 0000.